African Journal of Business Management Vol.5 (22), pp. 9448-9454,30 September, 2011 Available online at http://www.academicjournals.

org/AJBM ISSN 1993-82332011 Academic Journals

Full Length Research Paper

Strengths, weakness, opportunity and threats (SWOT) analysis for farming system businesses management: Case of wheat farmers of Shadervan District, Shoushtar Township, Iran
Ahmad Reza Ommani
Department of Agricultural Management, Shoushtar Branch, Islamic Azad University, Shoushtar, Iran. E mail: a.omani@iau-shoushtar.ac.ir. Tel: 00986114426215.
Accepted 30 March, 2011

Strengths, weakness, opportunity, and threats (SWOT) analysis indicates a framework for helping the researchers or planners to identify and priorities the business's goals, and to further identifies the strategies of achieving them. SWOT analysis is a technique to analyze the Strengths, Weakness, Opportunity, and Threats of business. In all countries, farming practices have vital role to food security. Population growth is the major reason for increased food demands and it puts additional pressure on the natural resource. Countries with rapid population growth face especially difficult challenges in ensuring food security. Therefore, using SWOT analysis identify strategies for agricultural development especially in farming systems and helping the researchers or planners to management and priorities them for achieving food security. The location of research was rural areas of Shadervan district of Shouahtar Township, Iran. The population of study was wheat farmers (N=1950). The sample size (n=165) selected by random sampling. Based on the results of SWOT, strategies for farming system management were prioritized. It include: development of poor local market opportunities and infrastructure, planting of crops with high economic values, development of governmental supports, preparing strategic plans to development organic farming, considering quality of crops, considering farm sustainability indexes, using sustainable water resources management and development of extension programs based on farmers needs. Key words: SWOT, farming, management. INTRODUCTION A strengths, weakness, opportunity and threats (SWOT) analysis is a device that helps business manager to evaluate the strengths, weaknesses, opportunities and threats involved in any business enterprise, including farms and ranches. A SWOT analysis can help them gain insights into the past and think of possible solutions to existing or potential problems, either for an existing business or for new venture (USDA, 2008; Nouri et al., 2008). Specifically, SWOT is a basic, honest model that assesses what a business can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results (Singh, 2010). Completing a SWOT analysis of farm business is the first step in strategic planning (Table 1 and Figure 1).

Abbreviations: SWOT, Strengths, weakness, opportunity and threats; EFE, external factor evaluation; IFE, internal factor evaluation; SPACE, strategic position and action evaluation; QSPM, quantitative strategic planning matrix.

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Table 1. SWOT analysis matrix (Whalley, 2010).

Strengths Opportunities How do I use these strengths to take advantage of these opportunities? How do I use my strengths to reduce the impact of threats?

Weaknesses How do I overcome the weaknesses that prevent me taking advantage of these opportunities? How do I address the weaknesses that will make these threats a reality?

Threats

Internal analysis

External analysis

Internal strength and weaknesses

External opportunities and threats

Continual feedback

Evaluation of options and selection of strategy Implementation and management of the chosen strategy

Figure 1. The process of SWOT (Riston, 2008).

Singh (2010) conducted SWOT analysis for identifying strategies for community development. Based on this exercise the following five categories identified and prioritized by villagers for the development of their village for future. 1. Conservation and utilization of natural resources (with particular reference to water and forest) 2. Development of the wasteland, agriculture, and livestock sector 3. Promotion of livelihoods resources and human resource development 4. Promotion of health, cleanliness, and education 5. Development of village institutions. Akca (2006) used SWOT for assessment of rural tourism in Turkey. As a result, Turkey has important rural tourism potential. Shadervan district is located on southwestern of Shoushtar Township, Khouzestan Province of Iran. The total of rural at this district is 60 numbers. The cause of selecting this area for research is significant role of it on satisfy of food demands of society.

MATERIAL AND METHODS SWOT analysis technique was used to indicate current constraints and future possibilities of farming system business management in rural areas of Shadervan district of Shouahtar Township, Iran. The population of study was wheat farmers (N=1950). The sample size (n=165) selected by random sampling. In the study, following phases were used: I) Designing external and internal factors matrix. II) Analyzing SWOT matrix. III) Designing Quantitative Strategic Programming Matrix (QSPM). IV) Priorities identified strategies.

RESULTS Designing external and internal factors evaluation matrix At this phase of research, external (opportunities and threats) and internal (strengths and weaknesses) factors that affected on farming system of wheat farmers were

Continual feedback

Identification of the key strategic issues

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Table 2. External factors evaluation (EFE) matrix.

Opportunities

External factors New attitude regarding role of agriculture in national development The growth of population The increasing information technology The increasing industries that related to agriculture The development of new technologies Governmental support in policy programs for agriculture. Total Incoherent government policies Production risk Marketing and prices risk The price of inputs have very tolerance The raining is very low The price of crops is low Increasing use of external inputs Total Total weighted score

Weight 0.05 0.09 0.06 0.07 0.08 0.05 0.40 0.09 0.08 0.08 0.07 0.08 0.10 0.10 0.60 1

Rating 3 4 4 3 3 3

Weighted score 0.15 0.36 0.24 0.21 0.24 0.15 1.35 0.18 0.16 0.16 0.07 0.08 0.20 0.20 1.05 2.45

Threats

2 2 2 1 1 2 2

External factor score

I 4 Conservative 3 2.5 III 2 Defensive suggested strategies 1 type 2 2.46 2.45

II Aggressive

IV Competitive 3 4

2.5

Internal factor score

Figure 2. SPACE matrix.

evaluated. Based on the farmers idea, each item ranked and importance ratio coefficient identified. Based on the results the score of external and internal factor were 2.45 and 2.46. External factor evaluation (EFE) matrix (Table 2) The first part of the SWOT analysis requires looking outside our business at issues that we cannot control but can manage to enhance or reduce their impact on our

business. External factor evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing. Riston (2008) pointed out benefits of external analysis include: i) Increasing managerial awareness of environmental changes ii) Improving resources allocation decisions iii) Facilitating risk management

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Internal Factors

External Factors

Strengths (S) S1: High quality land S2: High technical knowledge of farmers for S3: Frequency of water riverside situation S4: Large labor force S5: Indigenous farming systems S6: New technology

Weaknesses (W) W 1: Extension system oriented towards accessible farmers W 2: Lack of added value W 3: Lack of resources W 4: Lack of reliable data and information on organic agriculture W 5: Poor local market opportunities and infrastructure W 6: Poor image marketing W 7: High cost of production

Opportunities (O) O 1: New attitude regarding role of agriculture in national development O 2: The growth of population O 3: The increasing information technology O 4: The increasing industries that related to agriculture O 5: The development of new technologies O 6: Governmental support in policy programs for agriculture Threats (T) T1: Incoherent government policies T2: Production risk T3: Marketing and prices risk T4: The prices of inputs have very tolerance T5: The raining is very low T6: The price of crops is low T7: Increasing use of external inputs

(Defensive) Suggested strategies

WT WT Strategies WT1: Development of extension programs based on farmers needs WT2: Development of governmental supports WT3: Development poor local market opportunities and infrastructure WT4: Preparing strategic plans to development organic farming. WT5: Planting of crops with high economic values WT6: Using sustainable water resources management. WT7: Considering farm sustainability indexes WT8: Considering quality of crops

Figure 3. SWOT matrix.

iv) Acting as an early warning system v) Focusing attention on the primary influences on strategic change. The EFE matrix process uses the five steps: List factors: The first step is to gather a list of external factors. Divide factors into two groups: opportunities and threats. Assign weights: Assign a weight to each factor. The value of each weight should be between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero means the factor is not important. One or

hundred means the factor is the most influential and critical one. The total value of all weights together should equal 1 or 100. Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating indicates how effective the firms current strategies respond to the factor. Rating captures whether the factor represents a major threat (rating = 1), a minor threat (rating = 2), a minor opportunity (rating = 3), or a major opportunity (rating = 4). If you use the rating scale 1 to 4, then strengths must receive a 4 or 3 rating and weaknesses must receive a 1 or 2 rating.

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Table 3. Internal factors evaluation matrix (IFEM).

Strengths

External factors High quality land High technical knowledge of farmers Frequency of water for riverside situation Large labor force Indigenous farming systems New technology Total Extension system oriented towards accessible farmers Lack of added value Lack of resources Lack of reliable data and information on organic agriculture Poor local market opportunities and infrastructure Poor image marketing High cost of production Total Total weighted score

Weight 0.07 0.06 0.06 0.07 0.09 0.07 0.42 0.08 0.08 0.08 0.07 0.08 0.10 0.09 0.58 1

Rating 3 4 4 3 3 3

Weighted score 0.21 0.24 0.24 0.21 0.27 0.21 1.38 0.18 0.16 0.16 0.07 0.08 0.20 0.18 1.08 2.46

Weaknesses

2 2 2 1 1 2 2

Multiply weights by ratings: Multiply each factor weight with its rating. This will calculate the weighted score for each factor. Total all weighted scores: Add all weighted scores for each factor. This will calculate the total weighted score for the company. Internal factor evaluation (IFE) matrix (Table 3) Internal factor evaluation (IFE) matrix is a strategic management tool for evaluating strengths and weaknesses in functional areas of a business. The IFE matrix together with the EFE matrix is a strategy-formulation tool that can be utilized to evaluate how a company is performing in regards to identified internal strengths and weaknesses of a company. The IFE matrix can be created using the following five steps: Key internal factors: The first step is identifying strengths and weaknesses. Weights: IFE matrix, assign a weight that ranges from 0.00 to 1.00 to each factor. The weight assigned to a given factor indicates the relative importance of the factor. Zero means not important. One indicates very important. Rating: Practitioners usually use rating on the scale from 1 to 4. Rating captures whether the factor represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4).

Strategic position and action evaluation (SPACE) matrix The strategic position and action evaluation (SPACE) matrix is a management tool used to analyze a company business. It is used to determine what type of a strategy a business should undertake. The SPACE matrix is broken down to four quadrants where each quadrant suggests a different type or a nature of a strategy: aggressive, conservative, defensive and competitive. The SPACE matrix analysis functions upon two internal and two external strategic dimensions (Figure 2). Strengths, weakness, opportunity (SWOT) matrix (Figure 3) and threats

SWOT is the first step of planning and helps planners to focus on key subjects. SWOT method is a key tool for businesses to formulate strategic plans. SWOT matrix including four strategies groups: 1- How are used strengths to take advantage of opportunities? 2How are reduced the weaknesses by taking advantage of opportunities? How are used strengths to reduce the impact of threats? And How are addressed the weaknesses that will make these threats a reality? Based on SPACE matrix, group III strategies (defensive) are the suggested strategies for agricultural development. Quantitative strategic planning matrix (QSPM) A basic principle of the quantitative strategic planning

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Table 4. QSPM.

Key factors O1 O2 O3 O4 O5 O6 T1 T2 T3 T4 T5 T6 T7 S1 S2 S3 S4 S5 S6 W1 W2 W3 W4 W5 W6 W7 STAS Priority

Weight 0.05 0.09 0.06 0.07 0.08 0.05 0.09 0.08 0.08 0.07 0.08 0.10 0.05 0.07 0.06 0.06 0.07 0.09 0.07 0.08 0.08 0.08 0.07 0.08 0.10 0.09

WT1 AS TAS 2 0.1 1 0.09 3 0.18 2 0.14 3 0.24 2 0.1 3 0.27 3 0.24 3 0.24 3 0.21 1 0.08 1 0.1 3 0.15 3 0.21 3 0.18 2 0.12 2 0.14 2 0.18 2 0.14 3 0.24 2 0.16 2 0.16 3 0.21 2 0.16 3 0.3 2 0.18 4.52 8

WT2 AS TAS 4 0.2 2 0.18 3 0.18 3 0.21 3 0.24 4 0.2 4 0.36 3 0.24 3 0.24 2 0.14 2 0.16 1 0.1 3 0.15 2 0.14 3 0.18 3 0.18 3 0.21 2 0.18 2 0.14 3 0.24 3 0.24 2 0.16 2 0.14 2 0.16 3 0.3 3 0.27 5.14 3

WT3 AS TAS 3 0.15 2 0.18 3 0.18 3 0.21 3 0.24 4 0.2 3 0.27 2 0.16 4 0.32 4 0.28 1 0.08 4 0.4 2 0.1 3 0.21 3 0.18 2 0.12 2 0.14 1 0.09 3 0.21 2 0.16 3 0.24 2 0.16 2 0.14 4 0.32 4 0.4 3 0.27 5.41 1

WT4 AS TAS 4 0.2 3 0.27 3 0.18 2 0.14 3 0.24 3 0.15 2 0.18 2 0.16 2 0.16 2 0.14 1 0.08 3 0.3 4 0.2 3 0.21 3 0.18 2 0.12 2 0.14 2 0.18 3 0.21 3 0.24 3 0.24 2 0.16 4 0.28 3 0.24 3 0.3 2 0.18 5.08 4

WT5 AS TAS 4 0.2 4 0.36 3 0.18 2 0.14 3 0.24 2 0.1 2 0.18 3 0.24 3 0.24 2 0.14 2 0.16 4 0.4 2 0.1 3 0.21 3 0.18 3 0.18 2 0.14 2 0.18 3 0.21 2 0.16 4 0.32 2 0.16 2 0.14 3 0.24 2 0.2 2 0.18 5.18 2

WT6 AS TAS 3 0.15 3 0.27 3 0.18 2 0.14 3 0.24 3 0.15 2 0.18 2 0.16 2 0.16 2 0.14 2 0.16 2 0.2 2 0.1 2 0.14 2 0.12 4 0.24 4 0.28 1 0.09 2 0.14 2 0.16 3 0.24 2 0.16 3 0.21 3 0.24 2 0.2 2 0.18 4.63 7

WT7 AS TAS 4 0.2 3 0.27 3 0.18 2 0.14 3 0.24 3 0.15 2 0.18 2 0.16 3 0.24 3 0.21 1 0.08 3 0.3 3 0.15 2 0.14 3 0.18 2 0.12 2 0.14 3 0.27 3 0.21 3 0.24 3 0.24 3 0.24 3 0.21 2 0.16 2 0.2 2 0.18 5.03 6

WT8 AS TAS 4 0.2 3 0.27 3 0.18 3 0.21 3 0.24 2 0.1 2 0.18 3 0.24 3 0.24 2 0.14 1 0.08 3 0.3 3 0.15 2 0.14 3 0.18 2 0.12 2 0.14 3 0.27 3 0.21 3 0.24 3 0.24 2 0.16 4 0.28 2 0.16 2 0.2 2 0.18 5.05 5

[Attractiveness scores (AS) is: 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive].

matrix (QSPM) is that businesses need to systematically assess their external and internal environments, conduct research, carefully evaluate the pros and cons of various alternatives, perform analyses, and then decide upon a particular course of action (David et al., 2008). The QSPM approach attempts to objectively select the best strategy. The left column of a QSPM consists of key external and internal factors. The left column of a QSPM lists factors obtained directly from the EFE matrix and IFE matrix. The top row consists of feasible alternative strategies derived from the SWOT analysis and SPACE matrix. The first column with numbers includes weights assigned to factors. Attractiveness scores (AS) in the QSPM indicates how each factor is important or attractive to each alternative strategy. The range for attractiveness scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. Total attractiveness scores (TAS) indicates the relative

attractiveness of each key factor and related individual strategy. Calculate the sum total attractiveness score (STAS) by adding all total attractiveness scores in each strategy column of the QSPM. The QSPM sum total attractiveness scores reveal which strategy is most attractive. Higher scores point at a more attractive strategy, considering all the relevant external and internal critical factors that could affect the strategic decision (Table 4). The range for attractiveness scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. Based on the results of QSPM, the WT strategies prioritized: 1) WT3: Development poor local market opportunities and infrastructure. 2) WT5: Planting of crops with high economic values. 3) WT2: Development of governmental supports. 4) WT4: Preparing strategic plans to development organic farming.

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5) WT8: Considering quality of crops. 6) WT7: Considering farm sustainability indexes. 7) WT6: Using sustainable water resources management. 8) WT1: Development of extension programs based on farmers needs. CONCLUSION AND RECOMMENDATIONS SWOT analysis indicates a framework for helping the planners to identify the strategies of achieving goals. SWOT analysis is a technique to analyze the strengths, weakness, opportunity and threats of business. In all countries, farming practices have vital role to food security. Population growth is the major reason for increased food demands and it puts additional pressure on the natural resource. Based on the results, the considered identified strategies have vital role to farming system development and increasing food security in this area. The important strategies that must be considered are: i. Development poor local market opportunities and infrastructure. ii. Planting of crops with high economic values. iii. Development of governmental supports. iv. Preparing strategic plans to development organic farming. v. Considering quality of crops.

vi. Considering farm sustainability indexes. vii. Using sustainable water resources management. viii. Development of extension programs based on farmers needs.
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